Sri Lanka's economy is poised for a gradual upturn following a challenging phase of consecutive contractions, according to the latest Asian Development Outlook (ADO) report released by the Asian Development Bank (ADB) in April 2024. The report forecasts a moderate economic growth of 1.9 per cent in 2024 and an improvement to 2.5 per cent in 2025.

After facing two years of economic downturn, Sri Lanka is witnessing early signs of recovery as evident from the second half of 2023. Key indicators such as a decrease in inflation to single-digit figures, a commendable build-up of foreign exchange reserves, and an appreciation of the exchange rate, highlight the green shoots of recovery, as per the report.

The ADB attributes this positive outlook to the ongoing reforms within the country, alongside improving consumer and business sentiment. A critical factor in sustaining this growth trajectory is the timely completion of external debt restructuring, which is vital for ensuring Sri Lanka's long-term debt sustainability.

However, the journey towards economic stabilisation is not without its hurdles. Sri Lanka faces the pressing challenge of addressing poverty vulnerabilities that have intensified due to the COVID-19 pandemic and subsequent economic setbacks. The ADB emphasises the importance of supporting the most affected and vulnerable segments of the population to counter the high rates of poverty and income inequality.

“Sri Lanka has made commendable progress in implementing difficult policy reforms and stabilising the economy in 2023,” said ADB deputy country director for Sri Lanka Utsav Kumar. “We are pleased to see the results of these reforms, with signs of recovery emerging. It is critical that Sri Lanka addresses the impact on the poor and vulnerable and also continues to implement reforms to address the underlying causes of the crisis and lay the foundation for fostering sustainable recovery, building resilience, and reviving growth.”

Fibre2Fashion News Desk (DP)

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